Paving a Path to Medical Marijuana Regulation: California Lawmakers Lead the Fray

In 1996, California voters approved cannabis for medical use by passing Proposition 215. The ensuing 20 years produced a patchwork of various court rulings, and cities and counties enacted bans, taxes and regulations while seeking to balance the needs of their communities with state and federal regulations. Late in 2015, the California legislature drafted and passed three co-joined bills, AB 243, AB 266 and SB 643 to form the Medical Marijuana Regulations and Safety Act (MMRSA). The MMRSA effectively creates a comprehensive plan to regulate and license medical cannabis.

Proposition 215 garnered approval of over 55% of California voters in 1996. According to some sources, it was deliberately vague to avoid conflict with Federal law and to encourage regulations to evolve as the market matured. Voter initiatives often lack the detail required to pass as a bill in the legislature, and likely the drafter’s of Proposition 215 intended to address specific medical cannabis benefits that were unavailable to patients at the time. Regardless, the legislature introduced and approved SB 420 in 2003 to provide further regulations and an “affirmative defense” for patients who might otherwise be subject to arrest. Among the provisions of SB 420 were issuing county medical cannabis identification cards to patients with a valid doctor’s recommendation; establishing cannabis “cooperatives”; and requiring “no smoking” zones within 1,000 feet of school facilities, youth centers or while operating a boat or motor vehicle.

Even with the passage of SB 420, public agencies sought judicial clarification, especially regarding potential conflicts with Federal law. San Diego County filed a lawsuit (2006) which alleged that forcing them to issue medical cannabis health cards violated the Federal Controlled Substance Act (CSA). The County lost the lawsuit and ultimately filed an appeal with the U.S. Supreme Court which denied their petition and rendered the original decision in the case final. In a separate ruling, the City of Garden Grove vs. Superior Court of Orange County (2007), Garden Grove was ordered by the Fourth Appellate District to restore cannabis confiscated from a medical cannabis user by local authorities and reminded local police that their job is not to enforce federal laws. In Riverside vs. Inland Empire (2013), Browne vs. Tehama (2013), and Maral v. City of Live Oak (2014) court rulings affirmed the right of public agencies to control or ban cultivation and distribution within their jurisdictions. Two major Federal tax court rulings CHAMP vs. The Commissioner of the IRS and Olive vs. The Commissioner of the IRS, helped form the basis for policies in levying State and Federal income taxes.

The California legislature then got involved. With recent polls indicating more than 70% of California voters approve existing use of medical cannabis, lawmakers decided it was “high time” to implement health and safety standards. Each of the three MMRSA bills was originally designed to address a particular area of the medical cannabis industry. AB 243 primarily addressed cultivation, AB 266 charted an administration path and SB 643 outlined medical guidelines and testing and labelling. The MMRSA establishes a dual licensing process for the cannabis industry (with a few “grandfathered” exceptions). Cultivator licenses are defined by grow size and method of lighting, and along with transporters, distributors, dispensaries and nurseries they must apply for and receive first a local license, then a state license before beginning operations. Testing is required for any retail cannabis product, and seed to sale tracking and labelling are also mandatory. Several existing government entities have responsibility to help with the regulations and licensing, and a new government department, the Bureau of Medical Marijuana Regulation is created to oversee implementation of the regulations and licensing and is expected to be fully operational by 2018. And the requirement that cooperatives or collectives exist as “not for profit” businesses is phased out and “for profit” medical cannabis business is allowed. The latest legislative action on medical cannabis is the proposal of a 15% State excise tax on medical cannabis (SB 987) by State Senator Mark McGuire, who was also the author of SB 643.

Now the question is – when will local public agencies begin to implement their own regulations and taxes on medical cannabis?

Note: At the time of this writing, 14 initiatives to legalize recreational cannabis are filed with the California State Attorney General. Several already received title and summary and are cleared to begin gathering signatures. We think the most likely initiative to appear on the ballot is 15-0103 commonly referred to as the Adult Use of Marijuana Act (AUMA). The AUMA has financial support to reach the ballot from Sean Parker, and is endorsed by Lt. Governor Newsom, the NAACP and the California Medical Association. Four states – Colorado, Washington, Oregon and Alaska – and the District of Columbia have legalized the adult use of recreational cannabis.